While the banking industry has weathered its share of economic challenges in recent years, the next major threat may be quietly building and it’s not what most banks are stress testing for.
In his recent American Banker op-ed,...
Commercial Real Estate (CRE) lending can be a powerful growth engine for banks—but only when managed strategically. Many banks limit their expansion due to outdated, one-size-fits-all concentration policies that don’t account for their unique capital profile. Instead of restricting growth based on arbitrary regulatory thresholds, banks can quantify their true capital capacity using data-driven analytics.
Your CRE lending strategy should fuel growth, not limit It. Many banks treat the 300% CRE concentration threshold as an ironclad limit, fearing regulatory scrutiny if they exceed it. However, this standard does not consider your bank’s actual capital strength, underwriting quality, or risk appetite.
Instead of a rigid limit, use loan-level and capital stress testing to determine the precise level at which CRE exposure could impact your institution’s survival in a severe downturn. Quantifying this threshold allows you to unlock additional capital for lending while staying well within safe regulatory guardrails. With a customized, data-backed strategy, you can grow CRE lending confidently, without increasing risk.
At Invictus Group, we are committed to helping banks navigate the complexities of CRE risk management. Our expertise enables institutions to assess their unique portfolios and implement strategies that safeguard their financial health amid uncertain times.
Download the CRE Concentration Risk Management Plan and learn how to:
- Unlock hidden lending capacity using real capital stress testing
- Align growth with capital strength—not arbitrary limits
- Proactively address regulatory concerns while maximizing profitability
- Benchmark your CRE exposure against peer banks and national trends
Download the CRE Concentration Risk Management Planand learn how to:
- Unlock hidden lending capacity using real capital stress testing
- Align growth with capital strength—not arbitrary limits
- Proactively address regulatory concerns while maximizing profitability
- Benchmark your CRE exposure against peer banks and national trends
Download the Sample Capital Plan and learn how to:
- Understand key capital planning components
- Define risk limits that align with your growth strategy
- Satisfy regulatory expectations while maximizing lending potential
Download the Tariff & Trade War Recession Scenario which emphasizes:
- Quarterly movements in critical macroeconomic factors (such as GDP, Unemployment, and Interest Rates)
- The limitations of monetary policy which may limit the effectiveness of any Federal Reserve response.
- The potential impact of tariffs on specific industries.
- Possible ways to modify your existing stress testing framework to consider critical differences between this scenario and more traditional recessions.
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